NEW YORK (Reuters) - The U.S. dollar
was stable against the yen and the euro on Friday as Portugal’s
largest bank sought to reassure investors about its financial
stability.

Banco Espirito Santo said on Thursday night that loan losses to the
troubled empire of its founding family would not put the bank at
risk of running short of capital.

That eased some concerns. The dollar weakened to nearly two-month
lows against the yen on Thursday as investors worried about
contagion and sought out safe haven investments.

“It put concerns in the market about European growth and the bank
sector,” said Mark McCormick, a macro strategist at Credit Agricole
in New York. “A lot of the concerns were idiosyncratic.”

The dollar was steady at 101.33 yen and little changed against the
euro at $1.3609. It rose 0.07 percent against a broad basket of
currencies to 80.185, according to the dollar index.

Thursday's market move was a shift for some traders, with a return
to "risk on" and "risk off" sentiment taking over from monetary
policy.

"We have been taking our cue from the bond market, now we’re looking
at equities," said Boris Schlossberg, managing director in fx
strategy at BK Asset Management in New York.

The U.S. dollar has been largely rangebound against the euro and the
yen in recent months, struggling to gain strength as the Federal
Reserve maintains a steady, relatively dovish tone and looks for
further growth before indicating an interest rate hike is on the
horizon.

Minutes from the U.S. central bank’s June meeting, released on
Wednesday, offered no new insight into Fed policy. The next focus
will be testimony by Fed Chair Janet Yellen to Congress on Tuesday.

With the Fed and the European Central Bank seen as unlikely to
announce any shifts in policy in the near term, investors continue
to seek out higher-yielding investments in alternative countries.

“The theme is really short the dollar, short the euro and a lot of
carry, especially in emerging markets and higher-yielding G10,” said
McCormick.

The Canadian dollar, meanwhile, weakened on Friday after data showed
the country unexpectedly shed 9,400 jobs in June, with the
unemployment rate rising to 7.1 percent from May's 7.0 percent.

The loonie fell 0.78 percent against the U.S. dollar to C$1.0729.

The Australian dollar also fell after Reserve Bank of Australia
Governor Glenn Stevens warned in The Australian newspaper that the
Aussie currency was likely too strong, and at risk of weakness from
a potential U.S. interest rate increase.

The Australian dollar fell as low as US$0.9373 from US$0.9394 before
the article was published. It later rose back to US$0.9387.